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The Art of Business

Recently, an article detailing the latest shopping habits of SAC Capital hedge fund honcho Steven Cohen circulated throughout the internet. Specifically, the article detailed Cohen’s $300 million spending spree on fine art pieces, including a $25 million Andy Warhol and a $25 million Pollock.

Billionaire hedge fund investors are the next breed of successive generations of Wall Street titans that have lavished their riches on art. For most people, the occasional article detailing the excessive spending of a few ultra-wealthy business tycoons is the extent to which they believe business plays a role in the posh world of fine art. Furthermore, frequent images of the unshaven artist waxing poetically about the meaning of a black dot on an oversized white canvas doesn’t do much to challenge the perception that art is not business. However, looking beyond the Prada cutouts who guard the gates of museums, galleries, and auction houses, one can truly see the bustling world of business that drives the fine art industry.

In New York City alone, the art market is a $11 billion dollar a year industry teaming with suppliers, wholesalers, distributors, and retailers. Much like any other industry, the business successes and failures of art-related businesses are just as heroic and spectacular as any other entrepreneurial venture. Take for instance the creation of Art Gotham Gallery. Art Gotham is a Manhattan art gallery focused on showcasing the work of early and mid-career contemporary artists. The gallery was founded in January 2005 by Kimberly Dawn.

Unlike what you might expect, Dawn is not an art history major who spent her college days pondering the works of French Impressionists. No, Dawn is a graduate of Georgetown University’s Walsh School of Foreign Service where she studied International Economics. Prior to launching Art Gotham, Dawn spent several years as a Wall Street investment banker. After a stint in corporate finance, Dawn decided to live her passion and become a fulltime artist. Due to the difficulty of getting galleries to take a chance on an emerging artist, Dawn decided to found her own gallery.

“As an artist, I found that getting work into galleries is not so much about talent as it is who you know,” recalls Dawn. “Not a lot of established galleries are focused on beginning artist, so I wanted to create a place to show their work.”

After securing a space for her gallery, Dawn spent the next three months developing the business plan for her gallery. “I decided that for the first year, the gallery would show only group shows to generate maximum exposure for both the artists and the gallery.” In addition to exposing more artists, group shows are great marketing vehicles because they leverage the friends, family, and collector base of multiple artists to direct more traffic to the gallery.

Like at any start-up, gallery owners have to work long hours and wear many hats to make the venture successful. To survive and flourish, gallery owners have to develop their relationship management, business development, financial planning and budgeting, and general leadership skills, among many others. “I’m definitely using all of the business skills I developed over the years, including learning a few new ones, like managing people,” laments Dawn.

A less traditional art entrepreneurial venture is Art Capital Group (ACG). ACG is a New York-based independent source of art lending. The company, founded by Ian Peck, is a cleverly conceived enterprise that offers offers financial and consulting services to assist art owners in creating liquidity from art assets.

“We operate much like a traditional bank,” said Louisa Smith a portfolio manager at ACG, “our clients are traditionally asset rich, but maybe cash poor.” Unlike traditional sources of capital, ACG is comfortable utilizing fine and decorative art as the sole asset of a collateral package. Smith, a J.K. Watson Fellow who studied the globalization of art, is part of ACG’s small staff trained in both art and finance that manages ACG portfolio of loans to gallery owners, dealer, nonprofits, museums, and collectors.

So despite existing in the shadows of financiers and industrialists who purchase millions of dollars of art and donate even more, the art industry, itself, is diverse and vibrant. In fact, over 28,000 people are employed in the New York City art sector alone. Enterprising individuals, like Kimberly Dawn and Ian Peck are creating businesses, employing people, and changing the way people view the business of art.

April 25, 2005
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